Inc. interview
Graham talks about why startups fail, $1 billion valuations, and how Y Combinator weeds out candidates. On whether the accelerator is underselling the challenges of entrepreneurship:
I’ve written a lot about what a bitch the start-up world is. So, maybe the other incubators are underselling, but we’re not. That being said, everyone is surprised by how difficult it turns out to be, because it’s not the kind of difficulty people have experienced before… Start-ups are hard but doable, in the way that running a five-minute mile is hard but doable.
Clarifies comment on accents
0 CommentsGraham clarifies a comment he made in Inc. magazine about how Y Combinator chooses candidates, and that a founder with a strong foreign accent can be a bad sign:
The case I was talking about is when founders have accents so strong that people can’t understand what they’re saying. I.e. the problem is not the cultural signal accents send, but the practical difficulty of getting a startup off the ground when people can’t understand you.
VCs should take less equity
In an interview with Ryan Lawler of TechCrunch, Graham discusses the value of the YC investments, how the accelerator dealt with too many companies in a previous batch, and why venture capitalists should move quickly:
Well VCs have financial models for how much they need to invest, and what percentage of the company they need to buy for it, in order to get positive returns. And they’re really nervous, somewhat justifiably so, because if you’re going to lose money as a VC firm you wont know it til about six to eight years later. So these models, they become sort of religious about them. But, they really feel like they can’t buy less than 20% of the company in the Series A round…and in a competitive deal since that number can’t move, then the only number that can move is the valuation.. That means that the amount invested increases, arbitrarily. These companies would like to sell half as much stock for half as much money, but that’s not one of the options. If there was a VC that broke ranks and said they would give companies the money they actually need instead of it being determined by random external forces, they would get all the good startups.
37 companies worth $40 million
Graham says that 37 Y Combinator companies have valuations of, or have sold for, at least $40 million.
New York Times feature
The newspaper profiles the firm’s Demo Day, speaking with Graham, Altman, and Livingston about the company’s strategy for picking startups to support. Graham:
Imagine an assembly line where Facebooks and Googles come along every few years. You can either pick that cookie off the assembly line or not. If you pick it off, it’s market price, which varies. But if you don’t pick it off, you’re out of the game.
Accepts first board seat
Graham joins the board of Watsi after spotting the crowdfunding non-profit on Hacker News and funding it through Y Combinator. Watsi:
We’re thrilled to have PG as our first board member.
For the first time I agreed to be on a board of directors: @watsi's.
— Paul Graham (@paulg) April 19, 2013
Zuckerberg at Startup School 2012
Graham interviews Zuckerberg about the flexibility that being in college allows, and he says that remaining flexible can help a career:
You’re going to change what you do.
Stops funding Y Combinator companies
Conway stops providing funds to companies in the program as the firm reduces the size of its funding to $80,000 from $150,000. Part of this is due to conflict between startup co-founders. Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital continue to supply funding. Conway will still be involved in the program. Graham says his decision is likely due to SV Angel’s small size relative to the other parties providing funds:
[It] actually didn’t make a lot of sense for [Conway] to be doing it in the first place
Hires moderator
Graham brings a second person on board to the site, after he spends three to four hours a day just on moderating duties.
It was becoming my life
Inc. interview
Ohanian tells the magazine about his conversation with Graham after Y Combinator rejected his initial pitch:
The next morning, on the train back to Virginia, hung over, somewhere in the middle of Connecticut, I get a call from Paul. He says, “I’m sorry, we made a mistake. We don’t like your idea, but we like you guys.” We got off the train, and I was able to sweet-talk the Amtrak lady into not charging us to turn around. In our conversation, Paul said, “You guys need to build the front page of the Internet.” That was all Paul, and that became Reddit. We built Reddit in three weeks.
The buyout also happened partly by chance:
The acquisition by Condé Nast basically started with a Halloween party, where we met a reporter who introduced me to a freelancer for Wired who told her boss about us. That editor’s husband was the biz-dev guy at Condé Nast. He worked on a licensing deal with us, and everything worked great. So we started talking money. Founders are supposed to be not at all interested in selling. But there is a price at which a founder can’t help being interested.
Startup ideas
0 CommentsGraham suggests creating a search engine that could challenge Google, replacing universities with other types of education, and writing code that could make several CPUs look to developers like one fast CPU.
The way to win here is to build the search engine all the hackers use. A search engine whose users consisted of the top 10,000 hackers and no one else would be in a very powerful position despite its small size, just as Google was when it was that search engine.
Pycon keynote speech
Graham gives the keynote speech to Pycon, the annual conference of Python programmers. He later reworks the speech as an essay, Frighteningly Ambitious Startup Ideas.
One of the more surprising things I’ve noticed while working on Y Combinator is how frightening the most ambitious startup ideas are. Any one of them could make you a billionaire. That might sound like an attractive prospect, and yet when I describe these ideas you may notice you find yourself shrinking away from them.
He discusses seven ideas: A new search engine, replacing email, replacing universities, movie content on the net, the next Steve Jobs, bringing back Moore’s Law, and automated medical diagnosis.
Tech Crunch interview
Graham says Y Combinator is now focusing more on people than ideas, as a team of founders who have been friends for some time will keep what seems like a difficult idea alive in order to not let each other down:
At the stage we’re funding people, at the beginning, the founder is more important than the idea…We’re looking for people who have been friends for a while and worked together on things…Almost every startup has some point where it seems like the startup is doomed, the startup is worthless
Founders now have more power
Graham talks to Tech Crunch about how demographic shifts mean founders have more power:
That means basically investors have to do things the way the founders want
Asked if that is good for business:
Probably.
He adds it is more socially acceptable to start a startup, and costs less money, shifting more power to founders and away from investors.
Startup School
Graham interviews Andreessen about Netscape and how the tech industry has changed. Andreessen:
All of us who were lucky enough to be involved back then were completely unaware of what was going to happen
SOPA boycott
0 Comments
Graham announces on Hacker News that companies that support the Stop Online Piracy Act will not be invited to Y Combinator’s Demo Day:
If these companies are so clueless about technology that they think SOPA is a good idea, how could they be good investors?
It’s not clear exactly which companies with venture capital arms have supported SOPA. Comcast/NBCUniversal’s Comcast Ventures has a stake in Y Combinator company CarWoo, and listed companies like CBS Disney, GoDaddy, News Corp., Sony, Time-Warner, and Visa have made tech investments in the past.
Office Hours speech
Graham sits down with aspiring founders at the Y Combinator event, and talks them through their business ideas. He talks about how Wozniak and Gates both got their ideas from solving problems that they faced:
A lot of people decide, I want to start a startup, I need to think of an idea for a startup…The best startup ideas don’t come from people trying to think of startup ideas, they come from people trying to solve problems…All the biggest startups, they tend to come from problems that the founders themselves have.
$5B-$10B valuation rumor
Sources say Dropbox is close to raising $200 million-$300 million in a round that would value the company between $5 billion and $10 billion. The sources say it has had multiple offers north of $2 billion and informal discussions around $8 billion.
Disrupt interview
Graham sits down backstage at the TechCrunch event to talk about what makes a successful founder. Determination is key:
People’s determination does change. Some people discover some kind of inner Bill Gates, other people are the sort of people who’ve always had things easy…people think they’re determined and then they see other founders who are even more determined.
On whether flexibility is an advantage or disadvantage:
The right kind of flexibility is to have high variation in flexibility, when you’re sure of something, genuinely sure…then you should stick to that. And with other things, you should be willing to change.
Bloomberg interview
In an interview with Bloomberg TV, Graham says, to succeed, startups must improve lives.
[Startups] have to make something that actually makes people’s lives better. It’s funny how straightforward it is. People often think that business requires some sort of trickery, or you have to corner the market or something like that, but actually you have to make people’s lives better.
He says that startups should not fear competition from companies like Apple and says that out of hundreds of companies he has funded only one (Kiko’s calendar app) was killed by competition.
I spend a lot more time telling people to stop thinking about their competitors, than I do telling them to think about their competitors as a way to work harder. People who are good have this inner drive that makes them work hard anyway. The really successful companies don’t spend a lot of time obsessing about their competitors.
